Huffington Post and AOL

Best article I saw on the $315m acquisition of Huffington Post by AOL was at Gigaom.

Most commentary suggests that AOL overpaid out of desperation, driven by the need to do something before their legacy business finally stops generating cash.

At first blush, the metrics for Huffington Post suggest it is a significant asset. Quantcast has huffingtonpost.com at 40m visitors per month, compared with about 14m for the New York Times (nytimes.com).

On the other hand, nytimes.com has 115m visits-per-month (8 visits per user), while Huffington Post has 93m visits-per-month (2.3 visits per user). Huffington Post is flat year-on-year for page-views, and down 40% in the last six months. Low rates-of-return-to-the-site, and falling page-views-per-user, are consistent with the feeling that Huff Post has been drifting more towards being a “content farm” that pulls in users to look at a single article that is designed to score highly on Google search: this one about Superbowl start times is a fine example of search-engine candy. Certainly, the site’s original “draw” as a left-of-center celeb-fest must have had the air let out of it by the decline in political enthusiasm on the American left in the past year.

Given this trajectory – that, and the fact that they were offered 10-times trailing annual revenues – it is easy enough to see why Huffington Post may have been a willing a seller.

Can the deal still make sense for AOL?

The risk of loss of focus by employees, or decline in editorial quality or reputation under AOL, is more than outweighed by the likelihood that superior advertising inventory and targeting can drive revenues, and that the AOL advertising machine, shared across multiple sites, will be more cost effective than one driven by Huffington Post alone. So far, so good.

Nonetheless, in a recent post on “The Daily”, I wrote about a possible outcome for news:

Media conglomerates form that capture enough content that they can be their own aggregator. Though it would not be surprising to see this attempted, I suspect that sources of news are too diverse to make it practical in the long term.

I still think that attempts by conglomerates to be entry-points or in-house aggregators of content will not work. Huffington Post’s relatively modest monthly-visits-per-user (2.3) confirms the thought – for most of its visitors, it is a place to visit occasionally, not a hub or a daily habit. More and more news and comment sites will be of that form, so no shame in it for Huff Post; but when news sites are visited occasionally, not continually, it does suggest that buying up a number of sites and then trying to be the entry-point for a significant number of users will fail.

A more flexible and expansive form of aggregation is still needed.

For startups, beyond the possibility of inventing and executing on the perfect form of next-generation news aggregation, the lesson of this deal seems simple – if your business trajectory is uncertain, and a strategically motivated buyer offers you a huge multiple to acquire your company, you are probably wise to accept.

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